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Summary The ARK Genomic Revolution Multi-Sector ETF launched last year with the goal of investing in companies that develop technologies related to extending and enhancing the quality of human life. The fund typically invests in about 40-50 names and is currently divided almost equally among all market capitalizations. The fund’s 0.95% expense ratio is currently the highest of the biotechnology ETFs. With biotechnology continuing to be the hot sector heading into 2015, we’ve seen several investment firms looking to capitalize on the trend. I’ve profiled a pair of those new biotech ETFs launched just recently here and here and another new one targeting a specific niche of the biotech universe began trading at the end of October of last year. The ARK Genomic Revolution Multi-Sector ETF (NYSEARCA: ARKG ) is from ARK Capital Management. Its primary investment objective according to the fund’s fact sheet is to identify securities that “are substantially focused on and are expected to substantially benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments, improvements and advancements in genomics into their business. One such way this is accomplished is by offering new products or services that rely on genomic sequencing, analysis, synthesis or instrumentation.” This ETF typically invests in about 40-50 companies and isn’t necessarily looking for the next big diamond in the rough. According to the ARK Management website (which happens to update the holdings of this fund on a daily basis), the median market cap of one of its holdings is $5B. Illumina (NASDAQ: ILMN ) – the company that develops and manufactures tools for the analysis of gene sequencing – is the ETF’s current top holding but other big positions include popular names like Monsanto (NYSE: MON ), Biogen (NASDAQ: BIIB ) and even Qualcomm (NASDAQ: QCOM ). The fund doesn’t necessarily come cheap though. Its 1.45% expense ratio is currently the highest in the biotechnology ETF space easily outpacing the category average of 0.48% and the SPDR S&P 500 ETF (NYSEARCA: SPY ) ratio of just 0.09%. Management is currently capping the expense rate at its current management fee of 0.95% (administrative expenses of 0.50% are currently being waived although it’s still the highest in the sector). That’s not entirely unexpected as new funds establishing their portfolios for the first time tend to be more inefficient until the level of assets under management (currently at around $5M for this ETF currently) increases. Thanks to the continued popularity of biotechs the fund has gotten off to a fast start. Since its inception, the fund is up 13%. That’s well ahead of the iShares NASDAQ Biotechnology ETF (NASDAQ: IBB ) return of 7% and the S&P 500 return of 2%. ARKG data by YCharts Conclusion With biotechs in favor right now it’s not surprising to see niche ETFs like this popping up. The top holdings of this fund are actually fairly different from those of the Biotech Index ETF so it looks like there is some diversification potential here. The fund is off to a good start and the active management of the portfolio is a differentiator but it comes at a cost. The current expense ratio is a bit prohibitive and should be monitored to see if it comes in line with the sector average over time. Overall, investors looking for biotech exposure should consider this ETF for their portfolios. Now that you’ve read this, are you Bullish or Bearish on ? Bullish Bearish Sentiment on ( ) Thanks for sharing your thoughts. Why are you ? Submit & View Results Skip to results » Share this article with a colleague Scalper1 News
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